Haldia Petro fate hangs in balance

Calcutta, March 2: Haldia Petrochemicals Ltd (HPL) has been able to arrest the continuous bleeding from daily operations by scaling up production to the highest level in the last six months.

However, the company has got this breathing space at a great cost. It has stopped making interest and principal payments to lenders — prompting bankers to call a meeting on Wednesday to take stock of the situation.

Over the last 10 days, the company has been making cash profit, although marginal, from operations after securing basic raw material naphtha in larger quantity than before through MSTC, a public sector trading firm.

Earlier, HPL was making a daily loss of around Rs 2 crore that ate into its working capital. It forced HPL into a vicious cycle of low non-remunerative production that increased losses, crippling its ability to buy raw material to raise capacity utilisation.

The company has now not only managed to stop the continuous erosion of working capital but also its net worth.

The move, however, has triggered concern among the lenders that a part of their loan may have to be treated as non-performing asset if the company fails to pay up by March 31, 2014, the end of the fourth quarter as well as the fiscal.

According to an account, unpaid dues to banks and financial institutions have reached as high as Rs 300 crore with more to be added this month.

Banks treat a company’s account as a non-performing asset (NPA) when the company does not pay the interest and the principal on the loan for three consecutive quarters. HPL requires around Rs 200 crore to avoid turning into an NPA in the books of some lenders.

However, the company is not in a condition to pay. It will be left with hardly any working capital if the funds are taken out, bringing production to a halt.

A bigger worry is how to manage the negative net worth of the company. According to an account, the net worth will be a negative Rs 500 crore at least. None of the company officials agreed to confirm the figures.

Technically, the promoters — The Chatterjee Group (TCG) and the West Bengal Industrial Development Corporation (WBIDC) — have time till March to infuse fresh equity. Alternatively, they will have to agree to convert part of the loan into equity.

However, the two promoters have failed to agree on fresh equity. The induction of a deep-pocket investor in Indian Oil Corporation (IOC) has also sailed into choppy waters because of a legal tangle between private promoter TCG and state government entity WBIDC over ownership.

In such a scenario, the promoters are likely to seek another round of fresh loan to pay off the interest and principal dues.

Last time, of the Rs 400 crore HPL received as loan from banks and WBIDC, Rs 350 crore went into loan payment, leaving Rs 50 crore for operations.

Without an immediate fresh loan, HPL will not be able to maintain the high production. The company has given contracts for naphtha till the end of March unsure whether it will have enough cash to buy it in April.

MSTC has opened a letter of credit for HPL to buy naphtha and is keeping stock. HPL is buying from the stock on a daily basis from daily sales. Even then, there is unpaid dues of around Rs 450 crore to MSTC.

HPL is required to make an interest payment of around Rs 40-45 crore a month. Without a booster dose of at least Rs 2,000 crore of fresh equity, HPL’s long-term future remains uncertain. However, none of the existing promoters seems to be in a position to infuse this amount of cash.

There is a strong buzz in the political circle that uncertainty will continue to cloud Haldia till the general elections are over in May. The company’s fortune may turn if Bengal’s ruling party Trinamul Congress is able to wield considerable power at the Centre when a new government is formed.

IOC stand

Indian Oil Corporation, which had made a bid to buy out the Bengal government’s stake in HPL, would wait till March 31 before taking a call on the matter.

“We will wait till the end of the financial year and then a definite call will be taken on the matter,” a senior IOC official told PTI.

There has been no official communication so far from the Bengal government after the bid was submitted in October last year, he said.